Gas Pressures Could Hurt Schlumberger, Baker Hughes

What's ahead for Baker Hughes (BHI), Schlumberger (SLB) and other oil and gas field service providers? New discoveries and breakthroughs in drilling methods have created a boon in U.S. natural gas production. But all that gas has pushed prices lower and sent drillers scrambling to reshuffle portfolios, while they concentrate on more profitable liquid plays.

At the same time, a sluggish economic recovery in the U.S. — and Europe teetering near economic collapse — has eased demand for oil and natural gas liquids. Slowing growth in China too has taken pressure off.

Those factors are potentially a challenge for the oil and gas field service providers who help drilling giants with specialized tasks. Baker Hughes and Schlumberger will give the first clues when they kick off their group's Q2 earnings season Friday morning.

Analysts expect Baker Hughes to report EPS of 77 cents, down 17%. Consensus estimates call for revenue to climb 10.9% to $5.26 billion. The company forecast declining margins in North America, due in part to seasonality in Canada and continued price weakness in its pressure pumping line, it said.

For Schlumberger, analysts expect earnings to climb 15% to $1. Revenue is expected to climb 8.2% to $10.4 billion. It also guided for lower pressure pumping prices.

Oil and gas field equipment suppliers Cameron International (CAM) and National Oilwell Varco (NOV) report on July 26.

What's ahead for Baker Hughes (BHI), Schlumberger (SLB) and other oil and gas field service providers? New discoveries and breakthroughs in drilling methods have created a boon in U.S. natural gas production. But all that gas has pushed prices lower and sent drillers scrambling to reshuffle portfolios, while they concentrate on more profitable liquid plays.

At the same time, a sluggish economic recovery in the U.S. — and Europe teetering near economic collapse — has eased demand for oil and natural gas liquids. Slowing growth in China too has taken pressure off.

Those factors are potentially a challenge for the oil and gas field service providers who help drilling giants with specialized tasks. Baker Hughes and Schlumberger will give the first clues when they kick off their group's Q2 earnings season Friday morning.

Analysts expect Baker Hughes to report EPS of 77 cents, down 17%. Consensus estimates call for revenue to climb 10.9% to $5.26 billion. The company forecast declining margins in North America, due in part to seasonality in Canada and continued price weakness in its pressure pumping line, it said.

For Schlumberger, analysts expect earnings to climb 15% to $1. Revenue is expected to climb 8.2% to $10.4 billion. It also guided for lower pressure pumping prices.

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02/13/2015 06:39 PM ET

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